Discover the Best TFSA Stocks for a Worry-Free Retirement

Looking for safe and steady stocks to hold in your TFSA for retirement? Here are three high end stocks for a mix of income and growth.

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TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.

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The TFSA (Tax-Free Savings Account) is an excellent tool to help ensure a worry-free retirement. Paying tax is one of the most stressful points in life. Why worry when you don’t have to?

When you invest in the TFSA you don’t pay any tax on your investment gains made in the account. Likewise, when you withdraw funds from the account, you don’t pay any tax (unlike with a Registered Retirement Savings Plan). No tax and flexibility are paramount for maintaining retirement wealth and peace of mind.

You can also preserve peace of mind by investing in a diverse mix of great quality stocks. Diversification can help protect you from market volatility and deliver steadier returns. If you are looking for some worry-free stocks for a TFSA, here are three to contemplate today.

Income returns for a TFSA

After a recent pullback, Canadian Natural Resources (TSX:CNQ) is starting to look attractive. Despite being an energy stock, CNQ has delivered an attractive mix of solid returns over the years. Its stock is up 178% in the past five years. Add in dividends and investors would have a 268% total return.

This has been an excellent stock for income growth and capital returns. As the largest energy producer in Canada, it has built a machine-like operation.

With a low cost to produce (around US$40 per barrel), its profits and cash flows are much less volatile than peers. It doesn’t hurt that it has multiple decades of reserves that it can unlock at only incremental cost.

After hitting its $10 billion debt target, the company is now returning all its excess cash to shareholders. That means ample share buybacks, further dividend increases, and even special dividends. With a 4.3% dividend yield, it is a great addition for a TFSA.

Capital returns for a TFSA

Constellation Software (TSX:CSU) might not be the most obvious stock for a retirement portfolio. It only has a 0.14% dividend yield. So, if it is dividend income you need or want, it may not be the best. However, if it is consistent total returns, this is one of the best stocks in Canada.

CSU stock is up 222% over the past five years and 1,425% in the past 10 years. You will be harder pressed to find a better business or management team in Canada. Constellation’s strategy to acquire vertical market software (VMS) businesses around the world has been (and continues to be) a resounding success.

VMS businesses are uniquely profitable and cash generative. A portfolio of these businesses is extremely resilient. It can effectively compound by taking its generous cash flows and reinvesting into more high-returning businesses. If you want to preserve and grow your retirement capital in a TFSA, this is an ideal lifetime hold.

Growth and income for retirement

Speaking about stocks to hold a lifetime, Canadian National Railway (TSX:CNR) has been a good stock. Its combination of income and growth make it a great candidate for a TFSA. Its stock is up 135% in the past 10 years. However, if you add in dividends compounded, it would have a 180% total return.

CN may not be the fastest growing stock, but its business has a strong moat and limited competition that make it a solid stock to hold. There are very few ways that bulk goods and commodities can cost efficiently move across North America. This dynamic helps preserve pricing power and maintain steady earnings per share growth.

CN has one of the best balance sheets in the industry, so it can use share buybacks as a strong way to uphold the stock. CNR stock yields 2.1% today. It has a great record of low teens dividend growth. For a stable anchor for a TFSA, CNR is a good stock to hold through retirement.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has positions in Constellation Software. The Motley Fool recommends Canadian National Railway, Canadian Natural Resources, and Constellation Software. The Motley Fool has a disclosure policy.

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